Revisions to Cal Grants Disqualify Many For-Profit Schoolss to Cal Grants Disqualify Many For-Profit School

The state of California recently adopted new eligibility standards for colleges participating in the Cal Grant program. Cal Grants allot funds to California high school graduates for the purpose of attending a qualifying in-state college or university. The new rules require institutions to keep their cohort default rates below 15.5 percent and their graduation rates above 30 percent.  This was good news for all California School Students!  These are 4th and 5th tier schools that charge more money than the most expensive colleges in the country and leave their students unable to find careers in what they have studied or make the kind of money they were promised, which causes students to default on their loans.

You know these schools----  you hear their ads on the radio and TV all day long.  University of Phoenix, National University, Westwood College, and others.

The changes reflect a growing concern over the legitimacy of some postsecondary institutions, primarily in the for-profit sector. As investigations into for-profit postsecondary institutional practices continue, misleading practices leading to poor graduation rates and higher levels of debt among students continue to surface. In light of these concerns, coupled with unprecedented growth in Cal Grant costs, the state of California recently enacted the two new changes to its institutional Cal Grant eligibility standards.

The California Student Aid Commission (CSAC), the agency responsible for managing Cal Grants, revised its list of eligible schools and rescinded eligibility for 154 institutions. The ineligible schools comprise 35 percent of all institutions and more than 80 percent of for-profit schools participating in the Cal Grant program in recent years.


CSAC already had begun awarding grants for the 2011-12 academic year. Some of these grants were to new students at newly ineligible institutions, CASC officials reported. New students, most of which had already decided where to attend school, did not receive notification to transfer to another institution until early May that year. Similarly, continuing students at ineligible institutions weren’t notified until May that their award amount would decrease by 20 percent. Whether it was due to the timing or some other factor, it is predicted that about 1,000 students (31 percent) who would normally have used their Cal Grant in 2011-12 did not do so.

In the short term, students have fewer college choices, however in the long term, eligibility changes could improve outcomes for Cal Grant recipients as students shift to eligible schools and institutions improve their outcomes.  Based on information provided in February 2012, savings for the 2011-12 school year were on track to meet the target of $10.7 million. With the new changes, savings were projected to reach $55 million in 2012-13. Early indications are that savings will fall at least $5 million short, however CSAC has not provided data to update actual savings. Savings are projected to increase in subsequent years.

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